by Pedro Miranda

Created on: March 22, 2009

I share the outrage at the use of taxpayer money to pay bonuses to the executives that caused the crisis in the first place.

That said, there are many reasons why we cannot force them to return the money. Ask yes, nicely, force no.

In the first place, the bonuses were pre-determined by their contracts with AIG. This is called pay for performance and is quite common in the financial industry and becoming common in other industries like healthcare. The gist of it is: You get a modest (relatively speaking) salary and, at a predetermined time, quarterly, semi-annually or at the end of the year, you get a bonus depending on your performance as measured by various metrics. This is a contractual obligation; to change it requires renegotiation of the contract with each employee affected. Renegotiation of contracts is possible but can only be forced if a company is under bankruptcy protection which AIG, at the time was not. Breach enough contracts and your creditors (in this case your employees) can force you into bankruptcy.

In second place, a bill like the one just passed by the House is blatantly unconstitutional. It targets a specific group of people, which is expressly forbidden, and it is retroactive which is also, and rightfully so, not allowed. It also seeks to punish a group of people, not for breaking the law, but for incompetence.

By all means, if these employees were incompetent, and their incompetence represents (as it probably does) breach of fiduciary duty, then there is a proper route for this:

Sue them!

Sue them in civil court for damages. That is the correct way, if you want to waste everybody's time and money on this.

What we cannot do is violate the constitution and set a precedent just because a group of people is unpopular. Right now the public is enraged at insurance company executives; what if they become angry at a different group?

The gay community is enraged at the Latter Day Saints Church, what if there is widespread ire against that church and the house decides to pass a bill targeting Mormons?

AIDS activists are enraged at the Pope's words about condoms and AIDS; what if the house decides to target Catholics?

What about Jews? What about Gays?

It is very worrisome that the legislators who signed off on the bill (without reading it) and who, in midnight negotiations took out the clause that would have forbidden the bonuses, now want to tar and feather the employees that (never mind how incompetent) collected their contractual dues for work already done.

By all means enact legislation to prevent this from happening again, sue in civil court whoever needs to be sued, but do not enact a bill that is unconstitutional and would set a damaging precedent were it to go through.

Of course, if it goes through House and Senate, and if the president doesn't veto it, as he should, there is always the Supreme Court to try and stop this foolishness.

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